Yasser Arafat was yesterday facing his most critical ­ and dangerous ­ moment since returning to the occupied territories after the start of the Oslo peace talks just over seven years ago to lead the Palestinian people on their own land.

Israel's prime minister, Ariel Sharon, was pressing forward with a plan that his critics, within Israel and beyond, say he has privately nurtured since long before his landslide election in February. He has ripped up the Oslo accords, which he always opposed, by destroying the concept of autonomous Palestinian-administered areas by bombing them with warplanes ­ in action again in Gaza last night ­ and invading with tanks. And he has dramatically reinforced Israel's military rule in the rest of the occupied territories, a policy which he has long favoured.

Eight years after his handshake on the White House lawn with Israel's late premier Yitzhak Rabin, the 73-year-old Palestinian "president" and former Nobel Peace Prize winner was last night living in the shadow of the Israeli guns.

Tired, isolated, stranded and torn between the need to placate the West and his own people, the proof of Mr Arafat's enfeebled position was on full display yesterday in the form of several Israeli Merkava tanks, parked menacingly on a bluff in the heart of Ramallah. One had its barrel trained on Mr Arafat's West Bank headquarters, where he is holed up in an office only 250 yards away, unable to travel.

Just a few yards away from the tanks lay more than an acre of rubble, crushed trees and twisted iron ­ the wreckage of the transmitter of the Voice of Palestine radio station, erected by the British rulers of Palestine in 1936, but blown up by Israeli sappers yesterday.

Two giant military bulldozers laid waste to its outhouses. The concept of "Area A" ­ the Oslo term for the fractured pockets of land under Palestinian rule, including most of Ramallah ­ had been reduced to a farce.

It came after Mr Sharon indicated that he was no longer willing to negotiate with Mr Arafat, although the chances that these two old adversaries would reach any significant agreement on the fundamental issues was always negligible.

The Israeli security cabinet, meeting after Palestinian guerrillas killed 10 Israelis in a bus ambush on the West Bank on Wednesday, announced that Mr Arafat had "made himself irrelevant", and that Israel would have no further contact with him.

Last night the international community was pressing Israel to change its mind, emphasising that it would continue to treat Mr Arafat as the Palestinians' leader.

But, on the ground, the Israeli military was driving developments. It has officially assumed responsibility for the impossible task of eliminating the paramilitary groups ­ particularly the Islamist nationalist Hamas and Islamic Jihad ­ whose massacres of Israeli civilians allowed Mr Sharon to win broad international consensus for his strategy, under the umbrella of the "war on terror". Israeli F-16 jets were in action for another night, launching its heaviest bombardment yet of Gaza City, sowing terror and chaos on the streets.

It was further evidence that Mr Sharon has raised the conflict to a new level. His officials say that this is because Mr Arafat has failed to carry out Israel's demand ­ backed up by the international community ­ to arrest the militants who have been attacking Israelis, killing more than 230 over the last 15 months.

Being ordered to enforce Israel's security interests always placed Mr Arafat in a dilemma. Moving decisively against Hamas, which enjoys deep support among Palestinians, would risk his own leadership and possible civil war. He also knows that jailing militants en masse is unlikely to satisfy Israel for long, as it would almost certainly fail to stop the attacks.

Israel has thrown thousands of Palestinians in jail, and assassinated scores of alleged ringleaders, and yet the conflict continues ­ fuelled by the deep popular resentment at Israel's attempts to use military force and economic deprivation to bludgeon them into compliance and by an almost universal belief that the international diplomacy, dominated by the United States, is incapable of delivering a fair solution.

Last night, the international community was scrambling to repair the damage. It is frightened of how far Mr Sharon might go ­ and who might be found to replace a deposed Mr Arafat. William Burns, the US Assistant Secretary of State for Near East Affairs, said the US still considered Mr Arafat as a partner"; the European Union said it, too, would continue to deal with him.

Will it make any difference? Mr Sharon is too canny to harm Mr Arafat himself, although he no doubt hopes to see him swiftly replaced by compliant local leaders. But the ex-general is a ruthless adversary and is unlikely to relieve the pressure.